Managing Change (AQA A Level Business): Exam Questions

Soundcheck plc

Soundcheck plc offers a streaming service enabling users in more than 160 countries to play a variety of content, such as music and podcasts, on electronic devices. The company initially offered its services free to consumers and earned revenue from advertisers. An additional, paid service was introduced in 2022. Paying subscribers benefit from better quality audio, no adverts, and playlists made by celebrities. Exclusive podcast content also provides paying subscribers with an enhanced experience which justifies a paid subscription model.

Since its launch in 2006, Soundcheck plc has grown to become the market leader. It now employs nearly 4000 staff globally. A stock market flotation has funded huge investment in building a high-quality technology platform, strong brand and a skilled workforce. However, Soundcheck plc has not regularly made an operating profit. Its costs have been rising significantly in recent years and in 2023 it lost £26 million as a global economic slowdown began.

In 2023, Soundcheck plc reached an agreement with trade unions about pay rates and ways of working. The agreement guaranteed starting salaries of at least £36 000 to many staff. This is significantly higher than the industry average. However, there is a global shortage of skilled software engineers and marketing staff so labour turnover rates remain high. In addition to competition for staff, new competitors are attracted to the growing market, including large rivals who are well established in other streaming markets. Other new entrants have also targeted the ‘free’ sector of the market. Some of these rivals have a competitive advantage because they own the rights to music or other content and so have lower costs than Soundcheck plc.

Simply Bake plc

Palm oil is a cheap oil ingredient used in the manufacture of many everyday items. Production of palm oil often involves farmers clearing rainforests. The destruction of this habitat has led to the loss of many animal species, including half of the world’s orangutans.

Powerful campaign groups with many members, such as Greenpeace and the World Wildlife Foundation, have highlighted the issue. As a result, consumers are increasingly aware of the environmental impact of using palm oil.

Simply Bake plc is a supplier of cakes to supermarkets, who then retail them as their ‘own brand’ products. For many years, palm oil has been an important ingredient in Simply Bake plc’s products, allowing it to meet the demand for cheap food.

In 2018, a small campaign group, Action against Palm Oil (APO), criticised Simply Bake plc. APO had carried out a survey using a sample of 100 of its 400 members to represent the views of UK consumers. The survey found that 67% of respondents wanted the government to ban the use of palm oil.

High-profile media campaigns have increasingly drawn attention to the issue of palm oil production. By 2019, supermarkets had noticed increasing numbers of enquiries from their customers about palm oil and environmental damage.

Finding alternative ingredients is difficult and expensive, but in 2020 Simply Bake plc announced that it will have changed all its recipes to remove palm oil by 2025.

WeRide plc

WeRide (WR) is a taxi business. It has an app that allows its passengers to find and book the nearest driver themselves. WR has grown quickly and its service is now available in over 400 cities in 60 countries. It employs its taxi drivers on flexible employment contracts.

Stricter laws are threatening WR’s growth in the taxi market in some locations. For example, several cities have:

• imposed limits on the number of new licences for all taxis in order to reduce congestion and pollution

• banned WR because of concerns that its vehicles do not meet new safety regulations.

In 2018, WR announced a change to its future strategy. Instead of trying to grow its taxi business further, WR intends to invest several million pounds in developing a rental service for electric bicycles. This will be delivered through its app.

WR’s Chief Executive said that individual methods of transport, such as electric bicycles, were better suited to travelling around cities than cars these days. She recognises that the move into the rental of electric bicycles might damage short-term profits, but thinks it is the right long-term strategy for the business.

Although the profit margin on an electric bicycle ride will be less than a taxi ride, WR’s Chief Executive believes that the profits from electric bicycles will eventually be higher than from taxis. However, some investors are concerned about the impact on dividends of the decision to move into electric bicycles.

Global Airways (GA)

Cabin crew are staff on an airplane who look after the passengers. The managers of Global Airways (GA) have recently proposed new pay levels for cabin crew who join the company from January 2019. Their pay would be lower than the cabin crew already employed by the company. This is part of an effort by GA to cut costs to enable the business to be more price competitive in response to aggressive price cuts by rivals. GA managers believe that cutting the price of its tickets can help to increase the airline’s operating profit margins on its flights.

A trade union, called UAS, represents many of the cabin crew staff. UAS has complained about the proposed pay levels. There has been one meeting so far between the UAS and senior management about the proposal. Managers want the pay deal to go ahead, UAS does not.

Since the meeting:

• UAS is considering whether to advise GA’s cabin crew that they take strike action

• the managers of GA have arranged to lease planes and use crew from another airline if needed. Managers believe that with these contingency plans GA could operate over 99% of its normal flight schedule

• the managers have undertaken new research (Appendix G).

Appendix G New research for GA’s management

• Income elasticity of demand for GA flights: +1.5

• Estimated annual income changes of GA’s target market 2018–2020: –2%

• Cabin crew membership of UAS union has increased this year to 65%